De Beers Revises 2015 Production Guidance

Gaborone: Global diamond giant, De Beers Group, which is 85-percent owned by Anglo American, has revised its production guidance for 2015 to 29 million carats from 31 million carats.

Anglo chief executive Mark Cutifani said the move was necessitated by a continuation of the market weakness of late 2014 during the first six months of the year that resulted in a 25 percent underlying earnings before interest and tax (EBIT) decrease to $576 million compared to $765 million, a year earlier.

He said that De Beers would continue to focus on its “operational metrics” and had also reduced unit costs by 10 percent in dollar terms.

Anglo said De Beers’ total sales eased by 21 percent to $3.0 billion from $3.8 billion during the first half of 2014, with rough diamond sales decreasing by 21 percent as well to $2.7 billion. “Lower rough diamond revenue reflected a 27 percent reduction in consolidated sales volumes to 13.3 million carats,” it said.

“Average realised diamond prices increased by 7 percent to $206/carat owing to the sale of a stronger product mix, despite a 4 percent lower average rough price index for the period.”

Anglo said De Beers had utilised operational flexibility at some mines to make marginal adjustments to production plans in response to the prevailing market conditions.

De Beers’ half-year production dropped 3 percent to 15.6 million carats due to lower grades and reduced plant availability at Orapa in Botswana.

In addition, operational flexibility at the Venetia in South Africa and Jwaneng tailings treatment plants in Botswana was utilized to reduce production marginally in response to softer trading conditions, it said.

Meanwhile, Anglo said global rough diamond demand in the second half of the year would be dependent upon the level of retailer restocking that takes place in preparation for the main jewellery selling season in the fourth quarter.

“In the meantime, working capital concerns in the midstream are likely to cause some short-term volatility in rough diamond demand,” it said.

“Global demand for diamond jewellery (in US dollar terms) is predicted to be stable in 2015. Downside risks remain, especially related to diamond jewellery demand growth in China, as the country grapples with slower economic growth and asset price challenges.”